Is the Felda Global Venture Holdings listing in the interest of settlers?

— Dr Lim Teck Ghee
CPI
Jan 03, 2012

JAN 3 — During the past few months, the government and Felda authorities have been engaged in a public relations exercise aimed at persuading Felda settlers as well as the public that the proposal to float Felda Global Ventures Holdings (FGVH) on Bursa Malaysia is in the best interests of the settlers.

But is it really so?

What has emerged from the government-controlled media has been almost exclusively the government version as to why the listing should go ahead. What is missing are answers to the questions raised by the opposition and independent analysts on the real benefits to settlers as well as a credible response to allegations that the interests of settlers are being subordinated — and even marginalised — in favour of other parties.

The stakes involved in the proposed listing exercise go well beyond those of any past Bursa listing exercise. At stake are not simply concerns of how well the offering will be received by investors; the initial IPO pricing; and other market-related issues. This is not your ordinary listing exercise aimed at reconciling the interests of a small group of initial shareholders with those of other new parties; neither is it a question of how much gains the initial settlers and shareholders can make from this listing exercise.

There are over 100,000 settler households; 240,000 members of Koperasi Permodalan Felda. Together with their immediate and other dependent family members, Felda settlers and their children number several million of our citizens. This very large group has formed the backbone of our agricultural community. The implications of the listing will not only affect their immediate future but it could also reshape the structure and dynamics of the rural peasantry. Many of these settlers presently eke out a modest but sustainable living from the land. Modernisation and adaptation to changing market conditions are important and necessary. But is this listing exercise the right way forward?

The overall objective of the exercise must not simply be about “unlocking value” or “creating the largest plantation entity in the world” or “expanding Felda’s international business footprint” — rhetoric that is as misleading as it is misguided. It should be about protecting the interests of our rural peasantry, ensuring that they remain landed (the original mission of Felda was to give land to the landless) and making sure that the benefits of any restructuring primarily accrue to them and are not hijacked by other parties.

In what way does the listing advance settler’s income and general wellbeing in the short, medium and long term? This needs to be fully elaborated and explained with data and figures, based on various best and worst-case scenarios. In particular, there is a need to address the concern that the scripts which the settlers will get in exchange may be disposed of for quick gain.

What is the downside for settlers? Again this needs to be carefully evaluated — not simply by general statements by anti- or pro-government politicians or supporters but by credible and independent analysts that are given equal coverage in the media — especially government-controlled media of radio and TV — so that the public, including settlers, can have access to and weigh the different points of view.

Internet-driven disquiet on the listing

Many of the dissenting opinions in the Internet on the listing have been ignored by the authorities. They relate not only to the details of the swap agreement affecting the different stakeholders but also to issues of governance and the windfall gains to key individuals and interest groups that are major players in the deal making.

On governance, unsettling questions have emerged with regard to FGV’s track record with losses allegedly running in the hundreds of millions ringgit during the past few years. Concern has also been expressed as to whether the exercise may be a devious plan to cover up massive losses incurred, especially by FGV’s foreign investments.

Other opinions expressed are more pungent and the sample below gives some idea of the intense behind-the-scene battle on the proposed listing.

A: One thing I can see – is that every bugger is shifting allegiance depending on where they can make a quick buck!

As for the listing – I am still not sure if it really is about helping the Felda settlers – because the folks who will really make the big bucks are CIMB and certain individuals who will get the bulk of the pink forms with very large blocks.

As I see it they want to move the profitable part of Felda into the loss making part – list it, take the plum bits and then cash out.

B: R… is obviously off his rocker and becoming too big for his britches. He is hiding behind this new pressure group so he can extract contracts from Felda well before it gets listed. This is an old trick of crony capitalists, though R… takes the cake – after all, who is he to say yes or no to Felda’s listing – why does the government need his permission to list Felda. Also, how looney can this businessman get, to say he will examine the terms of Felda’s listing before he blesses the deal… he really is power hungry enough to throw the dice at Felda, hoping he will become it’s chairman (that is why he is stirring the pot for Isa Samad to be sacked as Felda chairman) and if this does not work out, he has already got in his hand the hapless and clueless Samshuddin, the head of Felda settlers, to join him in creating a pressure group to bait for contracts. This Rozali and Sam are real shams – anything to promote their self-interest.

C: The reality actually is that the peneroka will not benefit from this listing. The listed entity will take away about 1 billion in Felda profits and [will] gain a one-off payment to Felda of about 6 billion. The profit taken away will impact social and economic programs for the Felda settlers and if you do simple maths, the listing money will only last 6 years. Then where will Felda get money to pay for these programs? The harsh reality is that the peneroka land is not as profitable and when you take the “cash cow” land out of Felda that does not belong to the peneroka but from Felda proper and transfer to FGVH, you have a serious long term hole you need to cover. This is the actual truth and that’s why the DG wants a thorough a study to be done first. He is a true Felda man and is a good man. The second generation Felda folk do not understand this and only see the short term again. The opposition is saying to the peneroka not to support listing as they will GIVE the land to them. This complicates things as other people now think that the DG supports the opposition. This is sooo not true. He is a loyal civil servant and the reasoning behind his questioning is purely for the good of the peneroka and NOT BECAUSE OF SUPPORT FOR THE OPPOSITION. People need to be clear on this.

D: The DG Dzulkefly has never been a opposition man. He’s always been a Felda man! He understands the background and the motives of Felda. The listing will benefit settlers in short term cash but the bulk of the money will be gained by CIMB and a select group of cronies. He like many don’t want to sacrifice the profitable part of Felda for the loss making one… – the Felda DG is being victimised and unfairly treated by Isa and Najib. He needs all the support and his side of the story to be told.

E: FGV is part owner of FH and many of the personalities in the management may be the same, but they are DEFINITELY NOT the same entity. FH has a separate set of shareholders, KPF. FH has a relatively focused set of business activities, most of them related to the plantation industry in one way or another, and has solid financial results. The only real disadvantage to KPF shareholders is their holdings are not liquid i.e. they are not freely tradeable shares. It pays very good dividends, though.

FGV has this other set of business, messy , unfocused, many of them making losses. The fact is, even if there is no wrongdoing, FGV has clearly got itself into business ventures that it doesn’t understand and doesn’t know how to manage.

Knowing Bolehland culture, the “No wrong doing” assumption is a very questionable one. Merging a solid, profitable, non-fully owned subsidiary into a troubled holding parent, while legal, raises many ethical questions. ….Most of the time the majority shareholders who mastermind such deals are either up to no good, or using it to cover up past mistakes or misdeeds.

Will the government ignore the growing groundswell of opposition?

In the coming days and weeks, the public may finally get the opportunity to get a better picture of the pros and cons of the planned listing from the anti-listing side. This is happening as those opposed to it are organizing a groundswell which is making it impossible for the government, Umno and Felda authorities to ignore. On 29 December, eleven non-governmental organisations joined hands to form the Save Felda Movement (GSF) aimed at stopping the listing of FGVH.

Leading the group is National Felda Settlers’ Children Association (Anak), which has been revealing wrongdoings in the land authority and was one of the first of the stakeholders opposing the listing.

Besides ANAK, the other NGOs in GSF are Teras, Muslim Youth Movement of Malaysia (Abim), Ikram, Solidariti Anak Muda Malaysia (SAMM), Pan-Malaysian Coalition of Islamic Undergraduates (Gamis), National Muslim Students Organisation (PKPIM), Seniman Paksi Rakyat (Paksi), Kumpulan Media Independent (Kami), Felda Settlers Action Front (Bangkit) and Felcra Participants Action Front (Bapa).

Last week separately, four KPF members filed an injunction to stop the public listing of FGVH. The court set January 4 for hearing the application, a day before KPF’s extraordinary general meeting on the listing scheduled on January 5.

What next?

It is important that the government does not clamp down on the public discourse. Other important voices such as those responsible for coverage in the media business community also should do the right thing by permitting the different stakeholders equal access to having their arguments disseminated. This coverage needs to be supplemented by the perspectives of independent analysts from business and other professional groups since the ramifications of the listing are of national concern.

In the latest development the president and chief executive of Felda Global Ventures Holdings, Sabri Ahmad, has said that plans to list on Bursa Malaysia in April 2012 are on track and that FGVH was firm in its mission to get the listing done within this time frame.

That is his opinion. If the groundswell of settler and public opinion runs in the other direction, there can and should be a delay until all the concerns are fully and transparently accounted for. The Felda authorities should not fear delay. Indeed it should welcome delay or even abortion of the proposed listing if this is found to be the better option for the settlers.